2020 (1) TMI 93 - HC - Income Tax

Penalty u/s 271(1)(c) - no proper recording of satisfaction - HELD THAT - Both the Commissioner (Appeals) as well as the ITAT have categorically held that in the present case, there is no record of satisfaction by the AO that there was any concealment of income or that any inaccurate particulars were furnished by the assessee. This being a sine qua non for initiation of penalty proceedings, in the absence of such petition, the two authorities have quite correctly ordered the dropping of penalty proceedings against the petitioner. Besides, we note that the Division Bench of this Court in Samson 2017 (1) TMI 1292 - BOMBAY HIGH COURT as in New Era Sova Mine 2019 (7) TMI 1002 - BOMBAY HIGH COURT has held that the notice which is issued to the assessee must indicate whether the Assessing Officer is satisfied that the case of the assessee involves concealment of particulars of income or furnishing of inaccurate particulars of income or both, with clarity. If the notice is issued in the printed form, then, the necessary portions which are not applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Sova Mine (supra), the notices issued had not struck of the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in matter of initiation of penalty proceedings - No substantial questions of law

Summary

Issues:
1. Whether the Tribunal was right in deleting the penalty under section 271(1)(c) of the Income Tax Act, 1961?

Analysis:
The appellant urged the admission of the appeal based on substantial questions of law regarding the deletion of penalty. The appellant argued that the revised returns filed by the respondents showed piecemeal disclosures, citing the case of Mak Data (P.) Ltd v/s. Commissioner of Income Tax. The appellant contended that the assessment order referred to concealment or inaccurate particulars, justifying the penalty. On the other hand, the respondent's advocate highlighted the absence of findings on concealment or inaccurate particulars. It was pointed out that the notice issued to the assessee lacked clarity on the basis for penalty, referencing relevant case law.

The High Court examined the contentions and records presented by both parties. It was observed that there was no satisfaction by the Assessing Officer regarding concealment or furnishing of inaccurate particulars, which is essential for initiating penalty proceedings. Citing previous judgments, the Court emphasized the necessity of a clear notice indicating the basis for penalty. In this case, the notice issued to the assessee lacked clarity and failed to strike off irrelevant portions, indicating a lack of proper application of mind in initiating penalty proceedings.

Considering the defective notice and the absence of findings on concealment or inaccurate particulars, the Court found no grounds for interference with the impugned order. The Court held that the impugned orders were consistent with established legal principles and did not warrant any interference. The Court also dismissed the appellant's argument based on the Mak Data (P.) Ltd. case, emphasizing the defective nature of the notice and the absence of findings on concealment or inaccurate particulars.

In conclusion, the Court held that no substantial questions of law arose in the appeal and subsequently dismissed the appeal based on the lack of evidence supporting the imposition of the penalty under section 271(1)(c) of the Income Tax Act, 1961.